The Minimum Viable Innovation Accounting System 

For years, executives have cited one consistent barrier to investing in innovation: the inability to measure it. Without clear metrics, innovation is often relegated to the sidelines—seen as a discretionary activity rather than a disciplined driver of growth. The consequences are real: careers in innovation become cul-de-sacs, and companies underinvest in what should be a core strategic priority.

With our book, Innovation Accounting, we aimed to shift that paradigm by providing a practical framework to professionalize innovation management. We propose a set of more than 25 key indicators that allow leaders to clearly evaluate their innovation portfolios, understand the impact innovation has on the growth of the company and help evaluate the performance of individual innovation teams prior to revenue. The proposed indicators are structured across four levels with each layer catering for the needs of a certain persona and answering a clear question:

1. Strategic layer for C-suite executives interested in knowing if the innovation efforts of the company are contributing to long-term growth or are just adding to OPEX?
   
2. Funnel layer for innovation leaders who want to know where projects are in the pipeline, and how efficiently are they progressing?
   
3. Tactical layer for team leads and coaches curious to know which teams merit additional investment, based on performance and potential?
   
4. Cultural layer for HR leaders keen to learn if the organization is fostering a culture that enables innovation to thrive?

That said, we recognize that implementing a full-scale innovation accounting system can be daunting for some companies. For these companies, the better path is to begin with a Minimum Viable Innovation Accounting System (MVIAS)—a simplified framework that delivers transparency and focus, without the burden of too much complexity.

To that end, we’ve identified 12 foundational indicators that belong in the minimum innovation accounting system. These metrics serve as a starting point for organizations looking to treat innovation not as a side project, but as a measurable, manageable, and scalable business function while at the same time allowing the company to further develop from here in a second phase. 

Strategic layer indicators for the minimum viable innovation accounting system

• Average funnel conversion rate (ACR) 

What it tells you: How many ideas make it to the market. 

Why is it important: It will help you set goals and align innovation investments with your company’s strategic intent by providing a realistic view of how many ideas are likely to reach maturity based on the number of new initiatives you start today.

• Average time to ‘sustain’ (ATS)

What it tells you: How fast are our ideas making it to market 

Why is it important: It will help you set goals and align innovation investments with your company’s strategic timeline by offering a realistic estimate of how long it takes for ideas to progress from concept to maturity.

• Investment Distribution (ID) 

What it tells you: What kind of ideas are being invested in

Why is it important: It reveals whether the company is actively pursuing growth beyond its core business and whether its investments align with its strategic priorities in terms of disruption prevention.  

• Aggregate estimated impact

What it tells you: How much is the innovation investment expected to contribute to growth.

Why is it important: It reveals whether the company is investing in ideas with the potential to significantly impact EBITDA, or merely in low-return initiatives—bringing pragmatism to innovation investment decisions.

• New Product Vitality Index (NPVI)

What it tells you: How much of today’s revenue comes from products we launched in the past 3/5 years.

Why is it important: It shows whether the company’s past innovation investments have contributed to EBITDA—and quantifies the extent of that contribution. It combines with Investment Distribution to paint a clear picture of where does growth come from in your business.

Funnel layer indicators for the minimum viable innovation accounting system

• Number of ideas in each stage

What it tells you: How many ideas do we have in each stage. 

Why is it important: It shows how many ideas are currently in progress and how far along they are in their lifecycle—highlighting when it may be necessary to initiate new ideas if the funnel is too thin.

• Number of ideas stopped in each stage

What it tells you: In which stage of your idea lifecycle framework (ILC) is the company stopping most ideas. 

Why is it important: It reveals whether the idea lifecycle framework and innovation process are working as intended—stopping unpromising ideas early to enable fast, low-cost failure. If ideas are stopped too late, it may indicate flaws in the lifecycle criteria or a culture affected by sunk cost bias.

• Average time spent in each stage

What it tells you: How long are our ideas taking to clear each funnel (ILC) stage.

Why is it important: It highlights which stages of the idea lifecycle are most difficult to pass, provides benchmarks for new ideas entering each stage, and may reveal skill gaps if teams consistently take too long or exceed benchmark thresholds.

• Average cost of failure

What it tells you: How much are we paying for every failed initiative.

Why is it important: A low cost of failure indicates an effective process and idea lifecycle, enabling ‘fail fast, fail cheap’ and allowing the company to test more ideas with the same budget. Conversely, a high cost of failure may signal cultural issues such as sunk cost bias or failure intolerance. This metric can also serve as a valuable self-benchmarking tool. This is why it is probably one of the most important indicators in the innovation accounting system.

Tactical layer indicators for the minimum viable innovation accounting system

• Holistic confidence

What it tells you: How much do we trust this particular idea to be on the right track to progress to the next ILC stage.

Why is it important: This metric functions as both a reverse indicator of risk and a proxy for learning velocity. High confidence from decision-makers typically signals a lower-risk business model that is ready to advance through the innovation funnel. However, this confidence should be grounded in evidence—not intuition—which means it should grow as teams conduct experiments and validate key assumptions. 

• Estimated impact

What it tells you: What can we expect from this idea

Why is it important: This metric estimates the potential impact of a specific idea, ensuring that its projected value remains above a minimum threshold set by the company. It helps prioritize investment in ideas with the potential to meaningfully contribute to EBITDA, preventing resources from being spent on low-impact initiatives.

Cultural layer indicators for the minimum viable innovation accounting system

• Average time to ‘kill’

What it tells you: How long it takes for your company on average to decide to stop an idea

Why is it important: This indicator reflects whether your company fosters a psychologically safe environment—one where teams feel empowered to present evidence that may invalidate an idea without fear of blame or career risk. A high score may also signal a culture that is intolerant of failure. This metric can serve as a valuable tool for self-benchmarking and identifying areas for cultural improvement and it impacts the ‘cost of failure’ indicator. 

Ultimately, what gets measured gets managed and metrics have the power to chance behaviors beyond the numbers that they are displaying. When innovation is managed well, it becomes a repeatable engine of growth rather than a gamble.

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